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MINNEAPOLIS — The CEO of FedEx doesn’t see drones taking over the package-delivery business
anytime soon.

Fred Smith said FedEx has several drone studies underway. But the idea of delivering items by
drone is “almost amusing,” he said on a conference call yesterday after the company reported
financial results.

Smith said FedEx has a drone expert on staff — its technology chief, Rob Carter.

“He actually owns a drone,” Smith said. “He reported that it operates about eight minutes and
can carry four Budweiser beers at his farm.”

Jeff Bezos, the CEO of Amazon.com, caused a stir recently when he said Amazon is exploring drone
deliveries, and that sending a small package via an automated drone could be reality in a few
years. United Parcel Service and German delivery company Deutsche Post DHL have said they are
evaluating drone delivery.

There are huge obstacles to residential-drone deliveries. The U.S. Federal Aviation
Administration barred their use for commercial purposes in 2007. There are no-fly zones abound in
places like Washington, D.C., and there are questions about who is liable if a drone crashes and
damages something, or someone, on the ground.

The comments from Smith, who is also FedEx’s chairman and president, came in response to an
analyst’s question about online sellers getting into the business of delivering goods
themselves.

Smith said Amazon and other online retailers “can unquestionably do local deliveries should they
choose to do so.”

But, he added, FedEx, UPS or the U.S. Postal Service will perform the vast majority of
deliveries. The three organizations are designed to handle large-scale deliveries, including costly
deliveries to residences, Smith said.

While FedEx may eventually have to cope with online retailers making their own local deliveries,
right now it is dealing with customers shifting from overnight-delivery service toward cheaper
ground transportation. That shift was a factor in the smaller-than-expected gain in FedEx’s
second-quarter profit reported yesterday.

Revenue and U.S. volume both fell slightly in FedEx’s express unit, which handles overnight
shipments and is the company’s largest division. Ground-shipping revenue rose 10 percent, and
freight revenue was up 4 percent.

Even with shippers moving away from express, cost cuts in that unit drove most of the company’s
profit growth.